Kraft Foods Inc. will acquire Cadbury Plc for £11.9 billion ($19.44 billion/Rs89,000 crore) in a transatlantic tie-up that ends the nearly 200-year independence of Britain's most famous candy company.

After more than four months of public sparring that followed Kraft's hostile-takeover approach for the UK confectioner, Cadbury's board accepted the US food giant's offer as Kraft relented to the demands of Cadbury management and shareholders, raising its bid and significantly boosting the cash component.

Kraft agreed to pay 840 pence a share for Cadbury, as well as a 10-pence dividend. The revised offer is for 500 pence in cash for each Cadbury share and 0.1874 new Kraft shares for each Cadbury share, an increase from its original offer of 300 pence in cash and 0.2589 new Kraft shares.

Cash now makes up 60% of the offer; originally, it was just 40%. Tuesday's deal unites Cadbury, which focuses solely on candy and traces its roots to 1824, with its larger and more diversified US counterpart. Kraft covets Cadbury in part because of the UK company's access to fast-growing developing markets such as India and Brazil. The deal came as Kraft faced a deadline imposed by the UK takeover authorities to make a final offer for Cadbury by the end of Tuesday.

Cadbury has repeatedly rebuffed Kraft since the Northfield, Illinois, company first publicly announced its offer in early September, which was then valued at about $16.5 billion. Many Cadbury shareholders in recent days have been vocal in their opposition to Kraft's cash-and-stock offer, which until the weekend was valued at about 770 pence a share. They might now be won over by the new offer, since many of the holders are hedge funds that bought Cadbury stock after Kraft put the company in play, and are only looking for a relatively small return.

The recommendation from Cadbury's board is also likely to make a big difference in convincing long-term Cadbury shareholders, many of them big UK institutional investors, that selling to Kraft now is the right thing to do. Cadbury shareholders have until 2 February to accept the offer. It now appears likely that Hershey Co., which has been considering a bid of its own, will drop out. People familiar with the matter said 850 pence is out of the Pennsylvania company's range.

In addition, the Kraft-Cadbury accord includes a £117.7 million breakup fee, which would add to the price of a bid for Hershey. The UK takeover panel on Tuesday gave Hershey until Monday to announce a competing offer for Cadbury or take itself out of the running. Cadbury shares rose 3.5% to 835.50 pence in London. After trading for months at a premium to the offer, the shares now trade at a discount, indicating investors aren't expecting a higher offer.

As part of the new offer, Kraft said it would reduce the level of acceptances from Cadbury shareholders required to 50% plus one share from 90%. The latest round of talks was initiated by Kraft on Monday, according to a person familiar with the matter. Kraft chief executive Irene Rosenfeld had returned to London over the weekend after spending last week in the UK trying to sell Cadbury shareholders on the deal.

The move to engage with Kraft was an abrupt U-turn for Cadbury and its chairman, Roger Carr. He called Kraft a "low-growth conglomerate", accused it of showing "contempt" for Cadbury shareholders with its initial offer price and asked those shareholders not to let their company be "stolen". He and Cadbury chief executive Todd Stitzer have also criticized the track record of Kraft management, led by Rosenfeld.

The two men repeatedly signalled that they would rather do a deal with Hershey, which they indicated would be a better cultural and operational fit for Cadbury. The deal comes with risks for Kraft. Cross-border transactions have tended to fare poorly over the years. And Kraft's own shareholders--including its largest, Warren Buffett's Berkshire Hathaway Inc.--have publicly worried about overpaying for Cadbury. Rosenfeld met with Buffett recently and he was "totally supportive" of the new terms, a person familiar with Kraft's offer said.